Battle over generic-delaying continues

Yesterday, the congressional Subcommittee on Commerce, Trade, and Consumer Protection held a meeting to discuss Congressman Bobby Rush's (D-IL) new H.R.1706 bill--otherwise known as Protecting Consumer Access to Generic Drugs Act of 2009. Backed by representatives Henry Waxman (D-CA), John Dingell (D-MI), Mike Doyle (D-PA), Edward Markey (D-MA), Bart Stupak (D-MI), Jan Schakowsky (D-IL), and Diana DeGette (D-CO), the bill prohibits the brand-name drug companies from offering generic drug companies any incentive or compensation to settle patent disputes or otherwise delay bringing their products to market. For those of you who haven't been following, the primary issue surrounding the new bill is whether the reverse settlements and 180 exclusivity period enjoyed by generics makers had become part of anti-competitive practices. Here's a rundown of what each side had to say.

Those in support of the pay-for-delay practice say companies should have the flexibility to work out settlements as they see fit. There's no evidence that banning reverse settlements would reduce drug costs, argued Rep. Cliff Stearns (R-FL), who seemed to be the most staunchly opposed to the bill. Yet it costs companies over a billion dollars and 10 to 15 years to bring a drug to market, explained PhRMA's rep, and companies must be sure their proprietary rights will be honored. The rep also argued that the settlement practice also benefits consumers. According to PhRMA, brand-name companies win over 50 percent of patent disputes, which means fewer generics would enter the market if companies went through with litigation. And patent litigation can take years. Reverse settlements allow generics companies to bring their drugs to the market much sooner than the judicial process would.

"But wouldn't brand-names benefit from successfully defending their patents?" asked Rep. George Radanovich (R-CA). Litigation is uncertain, said PhRMA, and companies like certainty. Rep. Stupak, who did not seem to take sides on the matter, also raised concerns that if Rush's legislation is passed, companies will simply take the settlement practice overseas.

Congressman Stearns pointed out that generics makers are aligned with brand-name companies in support of pay-for-delay. Not so fast, said Rep. Schakowsky. "Generics and brand companies are on the same side because they both benefit to the detriment of the public." Schakowsky and other supporters of Rep. Rush's legislation say reverse settlements allows brand-name drug companies to maintain monopolies and pricing power by stifling competition. The practice hinders competition between brand-name companies and copycat drugmakers, but generics company Apotex also argued that generic companies that settle essentially do so for all off-brand drugmakers. And those first-to-file generics companies are able to enjoy incentives while other generics continue to be blocked from the market.

But according to Apotex, these settlements are only a symptom of the problem. It's not the settlement agreements that are the real threat to competition, but the 180 day exclusivity period required by the Waxman-Hatch Act. Though Waxman-Hatch was conceived as a way to make it easier for generics makers to compete with brand-name companies, it's now the generics makers that are under the scope for their anti-competitive practices. Apotex called for a ban on the practice altogether just two years ago, but backtracked yesterday, protesting that the exclusivity period should be shared between the first-to-file company and the second company to challenge the patent.

The FTC has been pushing for a ban on settlement agreements for some time now, but FTC Commissioner Jon Leibowitz had some questions of his own to answer. Although ready to argue for the bill, the Commish seemed less than prepared to answer questions about the FTC's role and responsibilities. The agency argued that there have been at least 103 settlements over the past five years, and only two of those appeared legit. Rep. Steve Scalise (R-LA) asked, "Why hasn't the FTC gone after those companies that are engaging in anti-competitive practices?" Well, the short answer is that the FTC doesn't have the resources to challenge them all; it wants to use what it has to fight cases it knows it can win. If the agency had unlimited resources, it would go after all of the companies guilty of anti-competitive actions. That wasn't good enough for Rep. Scalise, who shot back that generics companies don't have unlimited resources either, but they still choose to challenge patents.

There are many sides to this debate and it's one that is likely to continue for some time. We'll continue to bring you updates as they roll in. In the meantime, let us know what you think.